ESTATE PLANNING FOR BUSINESS OWNERS – The Importance of Maintaining a Corporate Minute Book
A common issue we confront with our business owner clients is a failure to adequately maintain fundamental business records. While the following discusses the importance of maintaining a corporate minute book, the same considerations apply to the governing documents for other types of entities, partnerships, limited liability companies, etc.
A corporation’s minute book contains its important documents including its Articles of Incorporation, Bylaws, stockholder and director resolutions, stock certificates, stock ledger tracking the issuance and conveyance of stock, and any stockholder agreements. As a corporation makes significant decisions, adds or lose stockholders, elects directors and officers, or any other significant event, it is important to properly document these events in the corporate minute book.
Maintaining a minute book demonstrates the corporation’s adherence to legal formalities and reduces the risk that a court may ‘pierce the corporate veil’, thereby resulting in the stockholders being held personally liable for the acts or debts of the corporation. A minute book is essential in responding to an IRS audit or challenge as to whether a deduction or tax election was proper. Corporate minute books are also frequently requested when the corporation seeks commercial lending or investors.
In the Estate Planning context, a well-maintained corporate minute book can be helpful in developing tax planning and business succession strategies and is critical to properly document gift transfers to other family members. Furthermore, when an owner dies, his or her successors will undoubtedly encounter challenges with the requisite probate and tax reporting obligations if the minute book is not in order.
We regularly help business owners and their successors with maintaining, updating, or even recasting corporate minutes books. Please contact us if we can be of assistance.